Not My First Rodeo

Tuesday, October 4, 2022

As a second-time startup founder, here are some tactical things I'm going to do differently

Being on social networking sites as much as I am, I’ve seen my share of listicles about “what I would do differently if …” Since I’m in the process of starting another company myself, I decided to hand-pick my favourites and make my own list.

A quick bio for those who don’t know me - I’ve spent the last few decades working for startups in the US and the UK. Three of these went on to sell to larger companies, many are still successful, and a few died - some of them spectacularly. So, I’ve seen the full spectrum of startup activities in my time.

After working in digital marketing and web analytics for over a decade, I founded an AdTech company, Adavow, that could stop people from seeing ads for things they had already purchased. The company was ultimately killed off (prematurely, IMHO) by a general panic in the industry about the GDPR. But I digress…

That was a few years ago now, but I learned a LOT from that experience that has had a huge impact on how I approach running a startup now.

Now that I’m building a new company, I thought I’d share a few things that we are trying to bake in to create a stronger company and a Better place to work.

In no particular order…

No employees share option programme. Profit Sharing instead.

All the startups I’ve ever worked at gave ESOPs to everyone. But the ESOPs didn’t mean anything if they were never liquidated.  All of us, including me, have had lots of paper wealth that never translated into actual money.

In my new startup, we have no ESOP plan. 10% of the net profit every quarter is distributed within the team. We keep ourselves accountable to make profits. Everyone gets cash, which they use per their needs, and I do not bear the burden of converting their equity into cash.

For the few that do have equity, I will modify how our equity vests.

5-year vest (vs 4) with larger upfront grants. Single trigger acceleration for the founding team and a 5-year exercise period vs a more traditional 90-day limitation.

Radical transparency

This is something I’ve always wanted to do but could not achieve anywhere else - bring in 100% transparency. The company financials, everyone’s salary, the basis of that, everything should be known. No one should wield any power because of what they know.

So that is how we’re planning to do it.  Every quarter, the company financials will be shared with the team. Everyone’s salary will be known to everyone else. There is nothing hidden. I want people to focus on their work and their growth. Not in uncovering secrets!

This also relates to the first point. If we’re going to profit-share instead of offering ESOPs, everyone needs to know and understand where we are at any given point. Knowledge is power. Without it, how can people make the best decisions?

Consolidate all small check investors

I love the idea of people investing £1K-10K in startups & democratising this asset class but was annoying to require tons of signatures for everything. This time we'll pool everyone together in one vehicle.

Get audited *early*

Will hire real financial leadership as soon it's clear that we have PMF and make their first task to have our books audited the first calendar year we have real revenue. This will uncover future headaches early & be a big time saver for when it matters.

Be somewhat systemic in setting compensation upfront

At some point, every business needs to do this & it gets really hard to retroactively fit people into a system designed after the fact. Doesn't have to be madly sophisticated, just some method to the madness.

Zero recurring meetings

I'm sure we will end up adding some, but it's so much harder to subtract any kind of process than to add later, so we're going to be super careful every time we consider any recurring meetings (esp. if it takes away people from actual work)

Ship as little product as possible

I’ve seen this totally messed this up at several companies that built and shipped a million features en route to PMF that they then had to maintain forever. The goal here is to keep cutting scope repeatedly & have as narrow a product footprint up front.

Spend zero money on traditional paid marketing for as long as possible

This strategy will likely vary by industry, so it's not applicable for everyone, but would really want to nail product-led growth + every single organic channel before dropping a single £ into paid advertising.

Have a simple financial model & sanity check cashflow breakeven goals

I'm talking about something stupid simple that you don't need a head of finance for, but does the overall math work out for my biz to actually start making money without relying on infinite funding?

Good corporate counsel is 100% worth the £££; not the place to skimp.

Nothing more to say, really. Getting the legal details right the first time saves hundreds of hours (and thousands of £££) later.

Buying a premium domain name as early as possible

If you raise £££, it's totally worth spending $20-50k to get a badass domain that makes everyone take you seriously.

Use contractors (vs employees) for all non-critical business functions

I want to keep our FT team as small as possible. Practically, this means using many more contractors for random tasks. Today, we are only building what the core product is; EVERYTHING ELSE is either outsourced or managed by software. From day 1, our software bill was higher than our payroll. Work with experts across the globe. Rely on what they do best while I focus on mine.

(Corollary - no one who's not an FTE will ever write a line of code in our app.)

Do not build subscription billing from scratch

Your SaaS billing needs are not unique, and neither is ours. May as well implement what lets you scale to £50M+ in ARR upfront. (This principle is generally applicable to a whole lot more than subscription billing.)

Things I will not spend money on until product-market fit:

  • An expensive office
  • An expensive branding agency
  • Any benefits that are not health-related (but will have v.good healthcare)
  • Conferences or travel

That's it. That's everything I can think of today.

What lessons have you learned? Do you have other things you would recommend? Let's hear them in the comments and build better businesses together.

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